The year 2021 is almost over. If there was one way to sum up how the cryptocurrency industry has performed in the past twelve months, it would be monumental growth.
Major cryptocurrency records were broken, adoption grew, new industries emerged, and significant breakthroughs in blockchain technology were made.
Market Insight’s most recent edition recalls past events as well as deep-dive subjects in Cointelegraph Research industry reports.
DeFi and Altcoins
Solana (SOL), and Terra (LUNA) were the top two gainers in 2021. SOL gained 9,500% while LUNA gained 13,000%. The enormous gains were made possible by significant investments and ecosystem growth. You could also argue that their huge rallies were due to the fact that they were referred to as “Ethereum killers”.
The two tokens are among the top five most valuable in total value locked (TVL) in the Decentralized Finance (DeFi), scene. Solana is No. 5 with $11.45 Billion, and LUNA recently overtook Binance Coin (BNB), for the No. According to Defi Lama, the 2nd spot is $18.9 million. Cointelegraph Research will be focusing on Terra and Solana, two emerging ecosystems.
DeFi experienced a similar growth path to the wider crypto market in 2021.
Ethereum has seen increased competition. According to Defi Llama, its TVL share was 97% at January, but it is now only 62.54%. In 2022, the next stage of development in the sector will be uncertain due to the fact that DeFi’s growth this year has been so significant that authorities are now trying to figure out how to address it.
Although the DeFi market capitalization is still a small portion of the total cryptocurrency market cap it has experienced the same growth. Many believe integration with legacy banks could be one the key focuses of DeFi in 2022.
Nonfungible tokens (or NFTs) made their breakthrough in 2021, despite being around since 2014. The majority of sales occurred in the last 12 months. In December, they surpassed $14 billion. This report reveals that digital art collections and digital collectibles account for 91% of all sales volume.
The first half of the year saw a lot of sales driven by artists who joined the space with their collections. However, the second half saw more mainstream brands joining the space.
Coca-Cola, for example, auctioned Decentraland’s wearable bubble jacket skin, while Visa bought its first NFT. These brands were able to participate in the NFT market. According to the report, “CryptoPunks” was the most profitable NFT collection for 2021. This is because it offers a higher all-time return on investment than NFTs on popular collections like “CryptoKitties”, and “Bored Ape yacht club.”
NFTs have also disrupted gaming and are key to realizing metaverses through blockchain properties. Some critics are skeptical that the parabolic rise in 2021 will be realized in 2022, particularly with increased regulatory scrutiny.
However, the amount of venture capital investments that were funneled into NFT companies this year is quite impressive. According to PitchBook, NFT funding is expected to reach $2.1 billion by 2021. However, nearly 40% of VC deals involve one firm in Andreessen Horowitz. Firms with high growth potential may find it difficult to resist NFTs as the market continues to grow and sales continue to rise.
The cryptocurrency regulatory landscape has moved forward in 2021. 35 bills were introduced by the 117th United States Congress that focused on cryptocurrency regulation, central bank digital currencies and blockchain policy. Jerome Powell, the Federal Reserve Chair, stated that cryptocurrency does not pose a threat to stability in the U.S. financial markets. The regulation of stablecoins is a topic that may be brought up in the next year.
The President’s Working Group on Financial Markets stated in a report stablecoins could offer a better alternative payment option, but they are still subject to appropriate oversight. However, a bill introduced by Cynthia Lummis from Wyoming could help move in this direction.
Lummis will introduce a comprehensive bill for 2022 to provide regulatory clarity regarding stablecoins and guide regulators about asset classes. It will also offer consumer protections. The topic of cryptocurrency regulation will be a hot topic in 2022. The Cointelegraph Research team is also going to be studying it.
Nearly everyone agrees that Axie Infinity has revolutionized gaming. Play-to-earn was hugely popular because it offered real income opportunities to gamers who played video games. Data shows that play-to-earn applications (DApps), decentralized apps (DApps), dominated the second half of 2021 in terms connected, unique and active wallet addresses. As revealed in the previous newsletter, gaming tokens like The Sandbox (SAND), AxieInfinity (AXS), Enjin [ENJ], Enjin (ENJ), Illuvium(ILV), and Ultra (UOS] have outperformed Bitcoin in terms of gains.
DeFi was the sector that had the most connected addresses in the first seven month of the year. The DeFi sector saw the gaming sector take over. These two DApp categories created GameFi, which is thought to be the next step in blockchain development. While crypto-based games allow users to control their in-game assets through NFTs, DeFi elements could make it even more powerful. DeFi integration would allow users to access features like staking, where they can earn interest on their tokens.
The sector is still in its infancy, but it has a lot of appeal to people who are not cryptocurrency holders. These users could be a major source of cryptocurrency adoption. GameFi will likely become its center point in 2022.
The 2021 developments have allowed cryptocurrencies to attract a wider audience than ever before. Chainalysis data shows that global adoption has increased 880% in the first quarter of this year, compared to 2020. These key events are likely to be contributing factors to cryptocurrency becoming more mainstream. NFT Venture Capital activities, which were mentioned earlier, represent just 7% of the $30 Billion invested in crypto-related investments by 2021.
Despite the apparent increase in cryptocurrency ownership, it remains low. TripleA projects that the global average cryptocurrency ownership rate is 3.9%. The top three countries with the highest cryptocurrency ownership rates are Russia, Venezuela, and Ukraine. At least 10% of their citizens have cryptocurrencies.
Despite increasing adoption, cryptocurrency ownership is still relatively low around the world.
Low ownership rates mean substantial growth potential, so a CAGR of 60.8% for the cryptocurrency market between 2021 and 2026 may be possible. The value of the cryptocurrency market has risen from $364.5 million to $2.5 trillion last year — a 586% increase. The future could see new opportunities for growth in GameFi, Web3 assets and other sectors.
It is possible that tokenization of securities could occur on a larger scale. In fact, it is predicted that it will be the norm by 2030. The use of cryptocurrencies to pay for payment could be another area that has untapped potential. This will be discussed in a separate report.
It would be hard to predict which sectors will experience the same breakthrough in 2022 as NFTs did this year. Reports that are more in-depth and carefully researched about specific topics will be a better way to understand the nuances of each sector.
Cointelegraph’s Market Insights Newsletter shares Cointelegraph’s knowledge about the fundamentals that drive the digital asset market. This newsletter provides the most recent data on social media sentiment, on chain metrics and derivatives.
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Eileen Wilson –Technology and Energy
My Name is Eileen Wilson with more than 5 years of experience in the Stock market industry, I am energetic about Technology news, started my career as an author then, later climbing my way up towards success into senior positions. I can consider myself as the backbone behind the success and growth of topmagazinewire.com with a dream to expand the reach out of the industry on a global scale. I am also a contributor and an editor of the Technology and Energy category. I experienced a critical analysis of companies and extracted the most noteworthy information for our vibrant investor network.